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Index Mutual Fund or ETF?

Over the last few years exchange-traded funds (ETFs) have greatly increased in popularity. As of 2016, there was approximately $2.9 trillion held in ETFs globally. Because of their growing popularity with financial advisers and individual investors alike, understanding the nuances of ETFs is critical in order for advisers to be better equipped to meet the ever-changing needs of their customers. ETFs are comprised of a portfolio securities designed to replicate a particular index. Common examples of indices that ETFs replicate are the Dow Jones Industrial Average, the Standard & Poor’s 500 index, the Wilshire 5000 Total Market Index, and Barclays Capital US Aggregate Bond Index. Like many stocks, bonds, and mutual funds, ETFs can also be tracked daily in many financial publications and online. Due to the lack of trading in the portfolio there are very little capital gains distributions in which investors must pay taxes. Because of this low […]

Index Funds: The Oatmeal of the Investing World

We know it almost instinctively, from all the information we’ve seen about it: oatmeal is good for you.  For cryin’ out loud, Wilford Brimley made a living telling us “It’s the right thing to do, and a tasty way to do it.”  But in general, most folks look at oatmeal as a bland, tasteless, boring sort of food, and therefore choose much more exciting foods – often to our detriment. There’s a similar story about index funds for investing:  it would be to the benefit of every investor to choose index funds as the core of his or her investment strategy.  In this case, the part of Wilford Brimley is being played by Burton Malkiel – venerable author of the classic book A Random Walk Down Wall Street.  And again most folks, especially those of us who deem ourselves too sophisticated for such a bland, tasteless, boring investment, choose to […]

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